How Charitable Tax Deductions Work

What You Can't Deduct

Lest you're planning to donate to charities and deduct willy-nilly, there are restrictions that govern the process. As we mentioned before, the donation must be given to a qualified organization -- always check before you donate. Examples of nonqualified organizations include labor unions, political interest groups and candidates, country clubs, homeowners' associations, Communist groups, chambers of commerce, and foreign groups (but, thanks to trade agreements with Canada, Mexico and Israel, certain organizations in those countries might be OK). You can't deduct donations to individuals, either, even if you donate to a qualified organization and earmark your contribution to a certain person, like in the case of a natural disaster.

There are also all kinds of contributions made to qualifying organizations that aren't deductible. You can't write off raffle, bingo or lottery tickets, dues to a fraternal order, tuition, retirement-home room and board, or donations to lobbyists. And it's a no-no if the receiving organization makes life insurance premium payments with your donation and you (or someone in your family or of your choosing) is a beneficiary of that policy.

That's only the tip of the iceberg.

If you receive a benefit from the donation that's equal or greater in value to the donation — for example, receiving $200 tickets in return for a donation of $200 — you can't deduct any part of that $200. You also can't deduct the value of your time or services, even if you volunteered with a qualified organization. If there were expenses associated with your volunteering, you can write those off, but not your time. Personal expenses are on the no-fly list, as well. And if you incurred appraisal fees in the process of donating an item that was worth more than $500, you can't deduct those fees.

In addition to the restrictions on what kinds of charitable deductions you can take, there are limits on how much you can deduct every year. On the next page, we'll tell you about those limits.